Practical Legal Dynamics of Commercial Contracts To Guide Engaging Parties To Mitigate Protracted Litigation in Nigerian Legal System

1. PREAMBLE

Generally speaking, natural or legal persons enter into business or commercial contracts in Nigeria to create binding legal relationships. Therefore, this exercise is to essentially create critical information to guide engaging parties seeking to enter into commercial contracts such as supply agreements, service contracts, joint venture distribution contracts, various business transactions that create legal relationship to be in accordance with the relevant and applicable law(s) in order to seek appropriate legal redress when a breach occurs.

2. PERTINENT CLAUSES THAT NEED TO BE INSERTED BY ENGAGING PARTIES IN COMMERCIAL TRANSACTION AGREEMENTS

The subject focus at this juncture is to guide natural or legal persons seeking to enter into legally binding commercial contracts to insert the requisite clauses through their counsel in the interest of engaging parties, which are simply itemised as follows:

• dispute resolution provisions
• governing law
• relevant notice requirements
• relevant notice requirements as stipulated in the applicable law
• condition precedents to a claim
• ensure that the engaging parties have the due or proper authority to execute the contract
• due compliance with requisite provisions of Companies and Allied Matters Act (CAMA) 2020

3. IMPERATIVE STEPS UPON THE OCCURRENCE OF BREACH OF CONTRACT OR COMMERCIAL TRANSACTION

The recommended steps by Counsel for a party seeking redress for a breach of contract are essentially the following:

i. issuing a well articulated demand letter to the defaulting party outlining the breach arising from the contractual terms by clearly stating the remedies sought against the defaulting party and a stipulated deadline for requisite compliance.

ii. ensure that service of the demand letter or e-mail is properly documented and delivered with requisite receipts or e-mail trails to assist either the court or the appropriate Alternative Dispute Resolution (ADR) agreed upon by the parties to facilitate timely resolution of the dispute.

iii. assembling requisite evidence such as the executed contract by the engaging parties, purchase orders, invoices, delivery receipts, WhatsApp messages and any form of communication as documentary evidence as proof that the defaulting party is in breach of the commercial agreement binding on the engaging parties.

iv. prompt activation of ADR clause stipulated in the commercial transaction agreement to prevent undue delays that may cause irreparable harm such as dissipating assets, a supplier delivering defective goods to a third party, hence expedient to seek interim injunction, Mareva injunction or Mareva freezing order from the appropriate Federal High Court or a State High Court in the Nigerian judicial system.

v. judgment reached by the appropriate court, an arbitral award issued by an arbitral tribunal, court judgment arising from settlement reached by engaging parties either through negotiation or mediation can be enforced by the successful party by registration of the judgement through the court’s sheriff. However, foreign arbitral awards, by virtue of Nigeria’s ratification of the New York Convention provides the enforcement pathway to enforce such awards.

4. RELEVANT AND OTHER PERTINENT CONSIDERATIONS BY ENGAGING PARTIES IN COMMERCIAL TRANSACTIONS

Notwithstanding the earlier highlighted perspectives of this discourse, the following equally need attention, namely:

• PROMPT ENGAGEMENT OF LEGAL COUNSEL BY THE PARTIES TO THE COMMERCIAL AGREEMENT

It is necessary to engage a commercial litigation counsel before sending a demand letter to the defaulting party to the commercial transaction agreement. Early engagement of counsel with requisite expertise to ensure that the demand letter is procedurally correct and that any urgent preservation steps are ignited promptly, including conducting appropriate asset searches and verification of the status of the defaulting company at the Corporate Affairs Commission, an institution established by the Companies and Allied Matters Act (CAMA) 2020.

• ADR VIS-A-VIS COURT

The choice of pursuing either Alternative Dispute Resolution (ADR) or litigation through the Court system is one of the most consequential decisions a claimant makes. Accordingly, the right forum affects cost, speed, confidentiality and, critically, the enforceability of the final outcome of the commercial dispute. Therefore, the forms of Alternative Dispute Resolution (ADR) include:

• Arbitration

Nigeria’s Arbitration and Mediation Act 2023 provides the statutory framework for domestic and international commercial arbitration. Institutional arbitration is administered by bodies such as the Lagos Court of Arbitration (LCA) and the Regional Centre for International Commercial Arbitration, Lagos (RCICAL). Nigeria is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, enables parties within the Nigerian legal system to enforce foreign arbitral awards through its domestic courts, a significant advantage for cross-border transactions.

Industry observers expect that arbitration will continue to grow as the preferred mechanism for high-value and international commercial disputes in Nigeria through 2026 and beyond. Recent commentary highlights the increasing pro-arbitration stance of the Nigerian courts, with courts generally reluctant to interfere with arbitral proceedings except on limited statutory grounds.

• Mediation and Settlement

Mediation offers the fastest and least expensive route to resolution. The Lagos Multi-Door Courthouse (LMDC) and similar centres in other states provide structured mediation services. Mediation is particularly useful where the parties have an ongoing commercial relationship and want to preserve it, or where the amounts in dispute do not justify the cost of formal proceedings. Any settlement reached can be recorded as a consent judgment and enforced through the courts. On the other hand, the resolution of commercial disputes through the Court system entail essentially the following:

• Litigation, Commercial Court Practice

For disputes that require interim relief, involve allegations of fraud or concern parties with assets only in Nigeria, litigation in the Federal High Court, a State High Court, or a designated Commercial Court division remains the default pathway. The likely practical effect of recent case-management reforms will be to shorten commercial trials in well-managed court divisions, with active pre-trial conferences, strict filing timelines and firm hearing dates reducing the scope for delay.

Comparison: Arbitration vs Litigation vs Mediation in Nigeria

5. COMMENDABLE CONSIDERATIONS THAT GUIDE THE CHOICE OF ADR OR COURT. These will entail the following considerations, namely:

• Does the contract contain a mandatory arbitration or mediation clause? If yes, you must generally comply with it before commencing court proceedings.
• Is confidentiality important? Arbitration and mediation are private; while court proceedings are generally a matter of public record.
• Do you need urgent interim relief? Courts can grant injunctions and freezing orders more readily than most arbitral tribunals, although some institutional rules now allow emergency arbitrator procedures.
• Where are the counterparty’s assets? If assets are in Nigeria, domestic court enforcement is straightforward. If assets are not in Nigeria, an arbitral award is enforceable under the New York Convention and effective.
• What is the value and complexity of the dispute? High-value, technically complex disputes often benefit from arbitration before specialist arbitrators. Lower-value claims may be resolved more quickly through mediation or summary judgment in court.
• Is the business relationship worth preserving? Mediation allows both parties to craft a commercial solution. Litigation and arbitration produce a winner and a loser.
• Starting Court Proceedings in Nigeria, Procedure and Timelines need to be properly and duly considered.

5.1. Where ADR is not appropriate or has been exhausted, the next contract enforcement step is to commence formal litigation. This section outlines the procedural framework, which are:

• Which Court Has Jurisdiction?
• Jurisdiction in Nigeria depends on the subject matter and the parties involved:
• Federal High Court. Has exclusive jurisdiction over matters connected with the revenue of the Federal Government, banking, foreign exchange, admiralty, and certain corporate disputes involving federal agencies which are clearly enshrined in Section 251of Constitution of Federal Republic of Nigeria (CFRN) 1999 as Amended.
• State High Courts created under Section 270 of (CFRN) 1999 as Amended. These courts have general jurisdiction over civil and commercial matters between private parties. Most contract disputes between Nigerian businesses are filed in the State High Court of the state where the contract was performed or the defendant resides.
• Commercial Court divisions. Several states, notably Lagos State have established dedicated Commercial Court divisions with specialised judges and streamlined procedures for disputes arising from commercial disputes. Early indications suggest that cases filed in these divisions benefit from shorter timelines and more rigorous case-management.
• Pre-Action Protocols and Pleadings
• Before filing a writ of summons or originating process, check whether the applicable court rules impose a pre-action protocol, a mandatory step requiring the claimant to notify the defendant and attempt settlement before commencing proceedings. Failure to comply can result in cost sanctions or a stay of proceedings.
• Once proceedings are commenced, the claimant files a statement of claim accompanied by:
• All documents relied upon (the contract, demand letters, invoices, correspondence).
• Witness statements on oath from individuals with direct knowledge of the facts.
• A list of additional documents to be disclosed.
• The defendant files a statement of defence (and any counterclaim) within the timeframe prescribed by the court’s rules of procedure.
• Case-Management and Pre-Trial Conferences
• Under current practice, judges in Commercial Court divisions hold regular pre-trial conferences to narrow the issues, set firm hearing dates and encourage settlement. The likely practical effect of this approach in 2026 is to compress trial timelines significantly in well-managed divisions, though delays remain possible where interlocutory applications proliferate or where appellate proceedings intervene.
• Interim Remedies
• Nigerian courts have broad powers to grant interim relief to preserve the status quo pending trial. The most common forms of interim relief in commercial disputes include:
• Interim and interlocutory injunctions. Preventing a party from disposing of assets, breaching a restrictive covenant or continuing a harmful course of action.
• Mareva-type freezing orders. Restraining a defendant from dissipating or moving assets out of the jurisdiction.
• Anton Piller-type orders. Permitting inspection and seizure of documents or property where there is a real risk of destruction of evidence.
• Appointing a receiver over specific property or the business of a company to protect the claimant’s interests.
• To obtain interim relief, the applicant must generally demonstrate a prima facie case, a risk of irreparable harm if the relief is not granted, that the balance of convenience favours the grant of the order and has a legal right that needs to be protected.
• Enforcing Awards and Judgments, Domestic and Foreign
• Obtaining a favourable judgment or arbitral award is only half the battle. Successful enforcement requires careful post-judgment strategies, which are outlined as thus:
  • Enforcing Domestic Judgments
• Once a Nigerian court delivers judgment, the successful party may enforce it through the following mechanisms:
• Writ of execution (writ of fieri facias). Directs the court’s sheriff to seize and sell the judgment debtor’s property to satisfy the debt.
• Garnishee proceedings. Attaches debts owed to the judgment debtor by third parties, most commonly, funds held in bank accounts.
• Charging orders. Places a charge on the judgment debtor’s land or other property, preventing disposal and enabling eventual sale.
• Judgment summons. Requires the judgment debtor to attend court and be examined on their means, with the possibility of committal for wilful refusal to pay.

6. OTHER NECESSARY INFORMATION THAT ENGAGING PARTIES IN COMMERCIAL TRANSACTIONS NEED TO BE AWARE OF, TO GUIDE DECISION-MAKING

i. Enforcing Arbitral Awards in Nigeria

A domestic arbitral award is enforceable by application to the court under the Arbitration and Mediation Act of 2023.The court registers the award, and it becomes enforceable as if it were a judgment of the court. Courts will refuse enforcement only on limited grounds, such as a party’s incapacity, invalidity of the arbitration agreement, lack of proper notice, the award dealing with matters outside the scope of the submission, or a finding that enforcement would be contrary to public policy.

For foreign arbitral awards, Nigeria’s accession to the New York Convention means that awards made in other contracting states can be recognised and enforced in Nigerian courts, subject to the same limited grounds for refusal. The procedure involves filing the original award (or a certified copy) and the arbitration agreement with the court, along with certified translations if the documents are not in English.

ii. Enforcement Against Companies incorporated in Nigeria

It is salutary to highlight at this stage of this discourse that if the judgment debtor is a company incorporated under CAMA 2020, the claimant needs to verify the status of the company at Corporate Affairs Commission established under CAMA. The objective is to confirm whether the judgment debtor company has assets that can be reached in order to consider whether winding-up proceedings should be commenced where the company is unable to pay its debts. CAMA also governs the registration of charges over company property, which affects the priority of creditors in enforcement and insolvency scenarios. Where directors have misapplied company assets or acted in breach of their fiduciary duties, it may be possible to pursue personal liability against them, a step that requires careful legal analysis and evidence gathering.

iii. Cross-Border Enforcement Considerations

Where a counterparty’s assets are located outside Nigeria, enforcement requires either an arbitral award enforceable under the New York Convention or registration of the Nigerian court judgment in the foreign jurisdiction under applicable reciprocal enforcement treaties. International asset tracing, often involving forensic accountants and legal counsel in multiple jurisdictions, may be necessary. The cost and complexity of cross-border enforcement underscores the importance of choosing the right dispute-resolution forum from the outset of the commercial transaction agreement by engaging parties.

iv. Costs, Timescales and Practical Risks

It is noteworthy to succinctly highlight the following benchmarks which are indicative of requisite costs, hence the need to note the following timescales and potential risks, namely:

v. Arbitration. Institutional fees are set by the administering body’s fee schedule and are typically calculated as a percentage of the amount in dispute. Arbitrator fees, counsel fees, expert costs and administrative expenses can bring the total cost to a significant sum for high-value disputes. The timeline for an institutional arbitration in Nigeria is commonly between 6–18 months or thereabouts from commencement to final award.

vi. Litigation. Court filing fees in Nigeria are relatively modest. The major cost driver is counsel’s professional fees and the length of proceedings. A straightforward commercial claim in a well-managed Commercial Court division may be resolved within 12–24 months. However, complex cases with interlocutory appeals can take 36 months or longer.

vii. Mediation. Costs are typically a fraction of arbitration or litigation. Sessions at the Lagos Multi-Door Courthouse and similar centres can be completed in days.

Key practical risks and mitigation tips:

• Delay. Build realistic timelines into your commercial planning. Use active case-management provisions and resist unnecessary adjournments.
• Counterparty insolvency. Conduct early asset searches and apply for freezing orders where there is a real risk of dissipation.
• Enforcement friction. Even with a judgment, execution can be slow if the judgment debtor obstructs the sheriff or hides assets. Garnishee proceedings against bank accounts are often the most effective enforcement tool.
• Costs exposure. Nigerian courts have discretion to award costs to the successful party, but cost recovery rarely covers the full expense of litigation. Factor this into your commercial assessment of whether to proceed.

7. CONCLUDING COMMENTS

The question on how to enforce breach of contract in contemporary Nigerian legal system is discernible. The earlier highlighted perspective of this discourse provides a clear pathway for enforcement of breach of contract against the defaulting party in binding commercial transaction agreement. Furthermore, engaging parties in commercial transaction agreement need to be proactive. In other words, parties to agreement need not wait for a dispute to escalate before taking appropriate action by duly igniting requisite clauses specified in the executed commercial agreement by the parties so as not to precipitate a stalemate in commercial business transaction.

If you are facing a contract dispute in Nigeria and need practical guidance on your next steps, contact a qualified Nigerian commercial lawyer through Global Law Experts for a confidential discussion of your options.

Need Legal Advice?

This article was produced by Global Law Experts. For specialist advice on this topic, contact Theo Osanakpo at Dr. T.C Osanakpo & CO, a member of the Global Law Experts network.

Sources

Mondaq, Arbitration in Nigeria: What International Businesses Should Know in 2026

Global Arbitration Review, Commercial Arbitration: Nigeria

Thomson Reuters Legal Solutions, The Principles of Contract Law

Northeastern University / CBC Q&A, How to Enforce Contracts and Seek Remedies

PandaDoc, A Useful Guide to Contract Enforcement

Delos Dispute Resolution, Delos GAP Nigeria

Nigerian Journals Online, ADR in Nigeria (NM Akano)

UNCITRAL, New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards

Companies and Allied Matters Act (CAMA) 2020, Official Text

Constitution of Federal Republic of Nigeria 1999 As Amended

Arbitration and Mediation Act 2023